It is reported that NMDC and MMTC are likely to finalize the iron ore export contracts with Japan and Korea by this month end or early next month.

According to informed sources, a high level team comprising senior officials of the two organizations and from the ministry of mines will visit Japan and Korea towards the month end.

As per report three issues will be critical during the forthcoming meetings in Japan even as the state owned exporters from India decide to stick to the Australian price as the benchmark, a practice being followed for the past couple of years. However, negotiations between Australia and Japan over price are, it is learnt, still in progress and will hopefully be over by the time the Indian delegation will be in Japan.

The first issue is at what level will the new prices be settled. Inquiries reveal that the Indian exporters are hopeful of achieving at least 90% jump over the present prices ruling at USD 71 a tonne of lumpy ore and USD 61 a tonne of fines. The next important issue to come up for review is whether the present system of annual contracts will be replaced by quarterly contracts.

The third issue is whether the agreed contracts, either annual or quarterly basis, will be linked to the spot market rates. The quarterly contract system is in response to last year's stalemate in the negotiations between miners and Chinese steelmakers, when both sides were unable to reach an agreement on annual prices. The balance of pricing power shifted to the miners' favor with the emergence of China as a major consumer of the ore. The world's top ion ore miners thus stand to profit hugely in the short run from the new pricing system.

(Sourced from Business Line)